Fannie Mae Bolsters Multifamily Investment
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Company Efforts Geared Toward Stabilizing Key Market Segments and Increasing Rental Housing Opportunities
Amid stress in the capital markets and a downturn in the Commercial Mortgage Backed Securities market, Fannie Mae (NYSE:FNM) today announced that it will expand liquidity, stability and affordability by increasing its participation in key segments of the multifamily market. The company also announced that it has invested $20 billion in multifamily housing in the first half of 2008, further reinforcing Fannie Mae’s leadership in the multifamily market.
“Affordable rental housing is increasingly needed during this housing and mortgage market downturn. Fannie Mae is increasing our product offerings to provide additional liquidity to meet the changing market needs,” said Phil Weber, SVP of Multifamily at Fannie Mae.
According to a new report by Harvard University’s Joint Center for Housing Studies, households should grow rapidly over the next several years, from an increase of 12.6 million households from the years 1995 to 2005, to an increase of 14.4 million from 2010 to 2020. Growth is primarily due to the number and age distribution of the adult population. Many of these new households and many existing households will need affordable rental housing or will choose to rent because it meets their family’s needs. At the same time, however, the mortgage crisis has tightened lending and has made it more difficult to secure financing for rental housing construction and preservation.
In an effort to meet the rapidly-increasing demand for rental housing, Fannie Mae is increasing its commitment to purchase Small Multifamily Loans of up to $3 million, or $5 million in certain markets. These loans typically finance a uniquely affordable asset class consisting of properties that are located in urban areas near public transportation and serve working families. The company invested approximately $5 billion in Small Loans in the first half of 2008, a significant increase over 2007 mid-year production of $3 billion. Production includes both pool purchases and flow business. The company rewrote the Small Loan Guide and restructured its multifamily business to improve execution. It also made available the Micro Loan product earlier this year, which increases liquidity for small balance multifamily properties with mortgage loan amounts up to and including $750,000.
In addition, Fannie Mae plans to build on its market leadership in the Seniors Housing permanent debt market despite declining sales of seniors housing properties from the record pace of 2006 and 2007. Credit conditions have made investing in seniors housing in 2008 more challenging. The company provided over $1 billion in financing for Seniors Housing in the first half of 2008, and has increased its staff to help serve more borrowers and meet a multi-billion production goal for the year.
Recent market dislocation has resulted in no new military housing transactions being priced during the first five months of 2008. Fannie Mae will help restore stability to this market by purchasing up to $1 billion in military housing bonds; proceeds of the sale of these bonds are used to renovate existing on-base housing and build new units. The company invested $773 million in military housing bonds in 2007.
The Joint Center report also finds that affordability remains a significant challenge for many renters. The national median gross rent rose 2.7 percent in real terms from 2001 to 2006 while the median renter income fell by 8.4 percent. Under its Multifamily Affordable Housing initiative, Fannie Mae has a dedicated team that works with its lenders to provide financing or refinancing for properties that also benefit from state and federal subsidies, including Low Income Housing Tax Credits (LIHTC), tax abatements, and rental subsidies in order to preserve or create affordable housing units.
Fannie Mae will also help restore liquidity to the affordable multifamily bond market by continuing to offer its Bond Credit Enhancement product, which provides credit enhancement for tax-exempt bonds issued by state and local housing finance agencies and is often used to finance Low Income Housing Tax Credit (LIHTC) properties and preserve older HUD-assisted properties.
Fannie Mae’s efforts to expand the supply of affordable rental housing are part of its recently announced Keys to Recovery(TM) initiatives. For more information on Fannie Mae’s multifamily business, log on to www.fanniemae.com.
Fannie Mae is a shareholder-owned company with a public mission. We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.
Keys to Recovery is a trade mark of Fannie Mae. Unauthorized use of this mark is prohibited.
Source: Fannie Mae
